Washington - US Securities and Exchange Commission will implement large portions of a rule requiring companies to determine if their products contain “conflict minerals” from a war-torn part of Africa, SEC Chair Mary Jo White said Tuesday.
In testimony before a US House of Representatives committee, White said a recent appeals court ruling that struck down a provision of the conflict minerals rule does not justify delaying the rest of the regulation's requirements.
The court “went out of its way” to uphold the vast majority of the rule, White told lawmakers.
The conflict minerals rule stems from a provision in the 2010 Dodd-Frank Wall Street reform law that requires publicly traded manufacturers to disclose to investors whether any tantalum, tin, gold or tungsten used in their products may have originated from the conflict-ridden Democratic Republic of Congo (DRC).
Earlier this month, a US appeals court sided with three business groups that challenged the rule and struck down a provision that the court said violates companies' free speech rights.
The court found fault with a section of the regulation that forces companies to publicly state that their products are not conflict free.
At the same time, the court upheld the rest of the rule, including provisions that require companies to conduct due diligence on their supply chains to determine the minerals' origins, among other measures.
Later on Tuesday evening, the SEC's Director of Corporation Finance Keith Higgins issued a statement that explained in more detail how compliance will work when the deadline kicks in on June 2.
In his statement, he said the SEC will waive compliance with some of the rule's disclosure and auditing requirements, but still require certain other disclosures to be made.
Companies who are not required under the rules to file a “conflict minerals report” should proceed with disclosing some details about the inquires they undertook to determine the origin of the minerals, Higgins said.
Those who must file a conflict minerals report, he said, should still proceed and provide in the document a description of the due diligence they undertook to determine the mineral' origin.
However, he said, companies at this time will not have to declare publicly whether or not their products are in fact “DRC conflict free” or “not found to be DRC conflict free.”
He added that companies can voluntarily disclose if their products are conflict mineral-free, but only if the they previously elected to undergo an independent audit.
UNCLEAR HOW SEC WILL PROCEED IN COURT
The SEC has not yet announced how it will tackle the part of the rule that was struck down.
It could be remanded to a lower court for further proceedings.
It could also be wrapped into another free speech case involving a meat labeling rule that is due to be re-heard before the appeals court next month.
Tuesday was the first time that White and top SEC officials have publicly acknowledged how the SEC will proceed with the parts of the rule that were upheld.
“I have studied this very, very carefully,” White said, adding that companies should proceed to comply with the portions of the rule that were “clearly upheld by the court's decision.”
White's comments come just one day after the SEC's two Republican commissioners urged the agency to delay implementing the entire rule until all legal questions have been resolved.
The decision to proceed will likely irk companies and others who oppose the rule but delight proponents such as human rights groups, which say the rule will help discourage mining in areas gripped by violence and humanitarian conflict. - Reuters